Stock market crashes are an opportune time to buy. High quality companies, such as Cracker Barrel Old Country Store, Inc., are impacted by general market panic and sell-off, but the fundamentals of these companies stay the same. In other words, now is the time to buy strong, well-proven stocks at an attractive discount.
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Cracker Barrel Old Country Store, Inc. develops and operates the Cracker Barrel Old Country Store concept in the United States. Established in 1969, and led by CEO Sandra Cochran, the company employs 73.00k people and with the stock’s market cap sitting at US$4.0b, it comes under the mid-cap group. Volatility in the market is hardly detrimental to the financial health and business operations of a large, well-established company. Although some monetary and fiscal policy changes may impact some corporate financing decisions and strategy, what we’ve learnt over time is that these companies tend to adapt. And having a strong balance sheet and a history of proven success aids in this adaptability.
Cracker Barrel Old Country Store currently has US$401m debt on its books which requires regular servicing. This means it needs to have sufficient cash-on-hand to meet upcoming interest expenses. Cracker Barrel Old Country Store generates enough earnings to cover its interest payments, more specifically, its interest coverage ratio (EBIT/interest) is 17.35x, which is well-above the minimum requirement of 3x. Furthermore, its cash flows from operations copiously covers it debt by 93%, above the safe minimum of 20%. And, a given, its liquidity ratio holds up well with cash and other liquid assets exceeding upcoming liabilities, meaning CBRL’s financial strength will continue to let it thrive in a fickle market.
CBRL’s year-on-year earnings growth has been positive over the past five years, with an average annual growth rate of 13%, outpacing the market growth rate of 13%. It has also returned an ROE of 35% recently, above the industry return of 14%. Characteristics I value in a long term investment are proven in Cracker Barrel Old Country Store, and I can continue to sleep easy at night with the stock as part of my portfolio.
Next Steps:Cracker Barrel Old Country Store makes for a robust long-term investment based on its scale, financial health and track record. Remember, in bear markets, sell-offs can be unjustified. Ask yourself, has anything really changed with Cracker Barrel Old Country Store? If not, then why not scoop it up at a discount? Lining your portfolio with a few well-established companies can reduce your risk and help you scale your wealth in the long run. One thing you should remember though, is to do your homework. Do your own research, come up with your point of view. Below is a list I’ve put together of other things you should consider before you buy:
- Future Outlook: What are well-informed industry analysts predicting for CBRL’s future growth? Take a look at our free research report of analyst consensus for CBRL’s outlook.
- Valuation: What is CBRL worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CBRL is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.